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EOS Community Reduces Inflation from 5% to 1%, Burns 34M EOS

The inflation rate on the EOS network has been reduced to just 1% after the EOS community proposed and approved the change in a historic vote. While Brendan Blumer, the CEO of EOS parent company Block.one, celebrated the move as a testament to the network’s governance, many criticized its lack of decentralization.

The EOS community has approved the proposal to decrease the inflation rate on the EOS mainnet to from 5% to just 1%. According to Brenan Blumer, the founder and CEO of Block.one, the company behind the EOS blockchain.

In a Feb. 26 tweet, Blumer said that the vote caught him by surprise as both the proposal and its approval happened quietly overnight.

Wow! I woke up today to find that a proposal to reduce #EOS network inflation from 5% to 1% had been proposed and passed by the community overnight. This speaks to the power of decentralized governance, and networks designed to operate in the best interest of their holders.

EOS New York, an EOS block producer, said that the reduction in inflation was one of the most voted referendums on the blockchain, as almost every major block producer voted in favor of reducing the 5% inflation rate.

Until now, the 5% inflation rate meant that 1% of all tokens produced each year were distributed to block producers, while the remaining 4% was accumulated in the eosio.saving account, the funds in which were meant to be used to fund various community projects focused on improving the EOS network.

However, as the distribution of the funds in the eosio.saving account is also to be decided by voting, ongoing disagreements among block producers prevented it from ever being used. Until the inflation reduction earlier today, the account had a balance of 34 million EOS tokens, worth around $133 million at press time.

A proposal to burn all of the tokens in the account has been submitted immediately after the inflation was reduced, with 13 out of 15 active block producers voting in favor of it. According to EOSGo, all 34 million EOS tokens have now been permanently burned, reducing its circulating supply to just over 920 million tokens.

While Blumer and the EOS community celebrated the major milestone, the event was met with a lot of criticism from the rest of the crypto industry. Many criticized Blumer’s assertions that EOS was decentralized, saying that the ease with which the decision was made meant that the control of the network remained in the hands of a few big players.

Blumer, however, defended the move, saying that there’re few blockchains as decentralized as EOS.

If #EOS isn’t decentralized, nothing is. And if nothing is decentralized, EOS is still aligned. These type of actions highlight the crippling upgrade dynamics of proof of work networks. How do proof of work networks lower inflation or upgrade to proof to stake without division?

EOS lost just under 5% of its value in the past 24 hours, according to CoinMarketCap, and is currently trading at around $3.9. We are yet to see whether the reduced supply will push its price upwards in following weeks.

Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He built his first digital marketing startup as a teenager and worked with multiple Fortune 500 companies. He's an alumni from mass-transit app Ola and holds a degree in computer science engineering.